Image source: AveXis, Inc.

Shares of Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) have lost about 12.1% of their value since AveXis, Inc. (NASDAQ: AVXS) shared early evidence that its gene therapy benefited infants with spinal muscular atrophy (SMA). One of the most important drugs emerging from Ionis' pipeline, nusinersen, is intended to treat the same rare genetic condition.

Up close, the virus shell that delivers AveXis' AVXS-101 certainly looks threatening (just take a peek at the image above). Step back, though, and it seems like a much smaller threat to Ionis' nusinersen than recent stock movements suggest.

A big head start

In September, Ionis' partner, Biogen (NASDAQ:BIIB), completed the submission of nusinersen's new drug application to the FDA for treatment of spinal muscular atrophy. In earlier times (before electronic filings), new drug applications could fill a small bedroom from floor to ceiling. AveXis finished 2015 with just 18 employees, and simply proofreading a new drug application would keep them all busy for weeks.

AveXis recently presented highly positive data, but it could be years before it has an application to look at. The little biotech's SMA drug, AVXS-101, is partway through a phase 1 trial expected to wrap up around the end of next year. The company hopes to begin a second trial, designed to support an application, in the first half of next year.

It's good to be first

The Agency hasn't officially accepted the application Biogen submitted, but that announcement should come any day now. Biogen applied for a shortened review of six months, instead of the standard 10-month process, and it will probably get one. Babies born with infantile-onset SMA typically require help breathing before their second birthday. Without any effective treatments available at the moment, a priority review for the first is well justified. 

Image source: Getty Images.

If all goes well for Ionis and Biogen, nusinersen could become available for the most severe form of SMA as soon as next April. That would be several months before AveXis intends to begin its pivotal trial for the same patient population. If nusinersen is already available when AveXis is ready to submit an AVXS-101 application, there's little chance the FDA would stretch its limited resources to speed along a second SMA treatment.

Key differences

The FDA is willing to expedite reviews for drugs that are a vast improvement over available therapies, but it doesn't look like AVXS-101 is going to hit this target, either. It hasn't been tested head to head with nusinersen, but the data so far doesn't point in the right direction for AveXis.

In 111-patient phase 3 trial, infants receiving nusinersen showed a highly significant improvement over the placebo group in activities such as kicking their feet, crawling, and standing. Just as importantly, there were no adverse side effects related to treatment.

Image source: Getty Images.

AveXis hasn't performed a placebo-controlled trial, but interim results from an a 15-patient study show impressive achievement of motor milestones. Children with infantile-onset SMA almost never develop an ability to sit unassisted, but eight of 12 treated with a higher dosage of AVXS-101 reached this milestone. Unfortunately, four patients experienced treatment-related side effects. These events were limited to heightened liver enzymes and were easily resolved with an anti-inflammatory steroid.

Who's worried?

Nusinersen is expected to reach peak annual sales between $1 billion and $2.5 billion depending on potential expansion from infantile-onset SMA to less severe forms. Although nusinersen and AXVS-101 are designed to increase production of the same protein, they go about it in an entirely different manner. Ionis' drug alters the expression of the SMN2 gene so it produces functional SMN protein, but AVXS-101 uses a virus to basically "infect" cells with a working SMN1 gene to achieve the same goal.

This difference might allow AVXS-101 to eventually gain some traction with some SMA patients, but I wouldn't hold your breath. Ionis and Biogen already have encouraging data in less severe forms of SMA, while AveXis hasn't started looking.

Ionis Pharmaceuticals has little to worry about with nusinersen's position on the development timeline, a risk-reducing partnership with Biogen, and plenty of other shots on goal. In fact, without any revenue expected for years to come, AveXis investors should be the nervous bunch.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.